5 ways to prove you’re loan-worthy
So you’ve decided it’s time to buy a car- perhaps it’s the dream roadster, or just something to help speed up the daily commute. The only problem is, you need a car loan and traditional lenders are turning you down. This could happen for all kinds of reasons; perhaps you have a criminal record, a bad credit rating or a weak employment history. All of these factors become a major stumbling block in getting a loan because you will automatically be viewed as a high-risk customer. Fear not, though, as there are certainly ways around both kinds of hindrances if you can prove yourself to your lender.
1.Prove you have an income
The first step, and probably one of the most favourable ways to prove your reliability to a lender, is to provide some kind of proof of income. In a traditional working situation this can be through your employment contract and paystubs, however there are alternatives if you have a non-traditional source of income.
You can simply write down all of your income earned in one place, but try to include bank statements with matching deposits or copies of deposit receipts to support your claims. Alternatively, you can offer up invoices, tax statements or letters from those who pay you.
If you need to prove cash that you’ve came by via a route other than income, it is suggested that you use letters from anyone who has gifted you cash, attorney documents from inheritance or letters or receipts from any cash winnings.
The more information you can provide, the more likely you will be awarded the cash loan, but it is vital that you are honest with your lender from the beginning.
2.Have a long credit history
While this isn’t something that can be achieved at the last minute, it will certainly benefit you if you get started on the path to creditworthiness at a young age. The easiest way to do this is by opening a credit card account and paying off the balance each month. A two-year track record of on-time payments will boost your standing among potential lenders.
3.Have a good mix of credit
If credit is not the reason you are struggling with acquiring a loan, then ensure your credit score is strong. Having a good mix of credit behind you is a great way to prove your worth: be it car loans, mortgage loan, credit or personal loans. A diversity of loans paid off on time can only benefit your situation.
4.Don’t be a frequent lender
While payday loans are helpful in times of need, don’t make them a habit. Some lenders see applying for several loans at once as a sign that you may be in severe financial trouble and, you guessed it, this makes you a high-risk customer.
It caan be a red flag if you have been frantically applying for credit with various lenders. If it looks you’re a little strapped for cash, it might not be the time for you to be considering the kind of investment a car requires.
5.Offer to use collateral
In some cases a lender will allow you to use collateral, greatly lowering the cost of your loan by using property you already own in order to secure the loan you need. Similar to a collateral mortgage, in the case of a car loan, you may be able to use the car itself to secure the finance. Usually this depends on the lender you go with. In other situations you are able to use your home, should you own one, another vehicle, or even a savings account. Be warned though; if you can’t make your repayments you put your existing belongings on the line and could even lose them.